September 24, 2015

By email: e-ORI@dol.gov

Office of Regulations and Interpretations

Employee Benefits Security Administration

Attn: Conflict of Interest Rule

Room N-5655

U.S. Department of Labor

200 Constitution Avenue, NW

Washington, DC 20210

Re: Response to Conflicts of Interest Proposed Rule (RIN 1210-AB32)

Dear Sir or Madam:

I am writing regarding the U.S. Department of Labor’s (DOL) proposed Conflicts of Interest Rule 

(Proposed Rule) and related Exemptions, which address conflicts of interest in financial advice on 

pension-related assets. I submitted a comment letter, dated July 20, 2015, in the first round of 

comments. In light of the other public comments, testimony at the August public hearings held by 

the DOL on the Proposed Rule, and legislative activity, I want to reiterate my support for the 

Proposed Rule and correct misleading representations made by some members of the financial 

services industry.

Industry Arguments

Nearly all of the opposition to the Proposed Rule comes from self-interested financial industry 

participants and the membership organizations that support their interests. With more than $17

trillion of assets in accounts regulated by the DOL, including more than $7.5 trillion in IRAs, 

members of that industry that rely on their ability to provide advice to investors in spite of their 

conflicts of interest have a great deal at stake. Their arguments can be summarized as follows:

1. The provision of conflicted advice does not negatively affect retirement savers. That argument is 

wrong. 

Both the Council of Economic Advisors’ February report and the DOL’s Regulatory Impact Analysis 

show that conflicted advice costs retirement savers billions of dollars every year. Both of those 

reports are based on thorough analysis and rely on rigorous and independent academic research. 

Industry has not offered a single independent study or analysis to counter those reports. Instead, 

they offer only a variety of self-funded studies that use inapt comparisons.

2. Because the clear evidence shows that conflicted advice does impose excessive and unnecessary 

costs on retirement savers, the industry next argues that everyone agrees advisers should work in 

Dana M. Muir

Arthur F. Thurnau Professor of Business Law

Tel 734.763.3091 Fax 734.936.8715

dmuir@umich.edu

www.bus.umich.edu
September 24, 2015

Page 2

the best interests of their clients, but that their proposals are superior to the DOL’s proposed rules. 

This argument, too, is wrong. 

None of the industry proposals would actually require advisors to act in investor’s best interest. 

Some of the proposals ignore the difference between a fiduciary duty of care, which prohibits 

advisors from acting negligently, and the fiduciary duty of loyalty, which is very different and 

requires fiduciaries to eliminate or mitigate conflicts in order to ensure that they work in the best 

interest of their clients. The proposals also tend to undermine enforcement mechanisms that would 

ensure the Proposed Rules have teeth. Mandatory standards without effective enforcement 

mechanisms are, in fact, nothing more than recommendations. 

3. Next industry argues that even if conflicted advice imposes unacceptable costs on retirement 

savers and the DOL’s Proposed Rules would be required to address those costs, the Proposed Rules 

would cause all but the wealthiest savers to lose access to financial advice. Again, industry is 

wrong.

Some advisors, such as those who have earned the designation of Certified Financial PlannerTM, 

already voluntarily adhere to professional standards that include an obligation to provide advice that 

is in their clients’ best interest. It has not been, and will not become under the DOL’s Proposed 

Rules, impossible for them to earn a living while providing advice that meets that standard. And, in 

fact, advisers can continue to charge commissions and receive revenue sharing if that is how they 

desire to be paid. The only thing that changes for them is that the advice they give must be in their 

clients’ best interest. 

It is simply not credible for the financial services industry to argue that it will be unable to provide 

advice in the best interest of its clients and remain profitable. Advisers do it now. Advisers who rely 

on commissions and revenue sharing can continue to be paid in the same ways. To the extent that 

the industry must adapt to the Proposed Rules the approximately $17 trillion in assets in retirement 

accounts provides a powerful incentive to do so. 

4. When all their other arguments fail, the financial services industry argues that DOL should 

abrogate its obligation to protect retirement savers because the Securities Exchange Commission

(SEC) is the proper entity to address conflicts of interest in investment advice. This argument also 

fails.

Having ignored efficiency arguments in the debate over whether conflicts of interest negatively affect 

retirement savers, in the need to have a best interest standard that has teeth, and in the ability of 

industry to provide advice in their clients’ best interest, here industry finally pulls out an efficiency 

argument. But, as with all their other arguments, industry ignores the interests of retirement savers 

and what would be efficient for them. Industry’s argument is that it would be inefficient for financial 

advisers to have to comply with a high standard (best interest) for their clients’ retirement assets 

while only being held to a suitability standard for non-retirement assets.

First, nothing prevents all advisers from providing advice in the best interest of their clients’ with 

respect to all of their clients’ assets. Those advisers who commit to complying with a best interest 

standard already do just that. Second, the SEC only has authority to regulate financial advice given 

on securities. The DOL is the only entity that can regulate advice given on all types of investment 

products that might be used by retirement savers. Third, not only is the DOL the only entity that has 

the breadth of regulatory authority to address advice on all types of investment products, it is critical 
September 24, 2015

Page 3

to the mission of the DOL that it exercise its authority. If the DOL fails to finalize the Proposed 

Rules it will fail to protect interests of the millions of U.S. workers who will need to rely on their 

retirement savings. 

The Time to Move Forward is Now

It is time to recognize the financial services industry’s campaign of misinformation and political 

pressure for what it is – a self-interested effort to retain a status quo that should have ended at least 

five years ago when the DOL first proposed rules to protect retirement savers from conflicts on 

interest in investment advice. In the intervening five years, the DOL has sought comment from the 

industry, the public and anyone else interested in this topic. The DOL revised its approach so that 

the current Proposed Rules are principles-based and flexible enough to permit advice providers to 

retain their compensation structures. 

I urge the DOL to move forward with a final rule that will enable all retirement savers to rely on their 

financial advisers for advice that is truly in the best interest of those savers. 

Thank you for your consideration of these comments.

Yours truly,

Dana M. Muir

Arthur F. Thurnau Professor of Business Law